As a small business topic, pension auto-enrolment has been overshadowed of late by issues such as cybersecurity, late payment, business rates and, of course, Brexit. But as a rise in auto-enrolment-related fines shows, compliance still represents a challenge for small businesses. Alternative finance can help small firms avoid fines.

Small businesses behind massive surge in auto-enrolment fines

According to new data from commercial law firm EMW, the number of businesses handed fines by The Pensions Regulator for auto-enrolment errors rose by an eye-watering 144% in 2017-18. Almost 36,000 companies were fined, compared with 14,650 during the previous year, with the fines totalling a huge £42 million.

Interestingly, the giant leap in business being fined is primarily accredited to the expansion of the auto-enrolment pension system to cover small businesses with fewer than 50 employees. This would suggest that these smaller businesses are struggling to cope with the demands of the pension system.

It is not difficult to appreciate how the demands of engaging with the complex system and the resources required to achieve this would put smaller business under pressure and lead to errors. This is far more likely to be the main reason for the scale of non-compliance rather than a deliberate refusal to enrol employees.

New research by Opus Energy suggests that small business owners are working long hours in an effort to make a success of their businesses. The data show that small business owners work an average of 2,366 hours per year, compared with 1,950 for average employees. In addition, the research found that, on average, owners work 45.5 hours per week and over half work either six or seven days a week.

How alternative finance can help owners manage auto-enrolment demands

So, at a time when policy and non-policy costs are clearly weighing heavy on small business owners, how can they afford the resources to ensure that they comply with auto-enrolment pension rules and avoid fines? Alternative finance can help.

The likes of invoice finance, asset finance, peer-to-peer lending and crowdfunding are providing under-pressure small businesses with an alternative means of raising capital for essential investment, whether in maintaining cashflow, expanding workforces or purchasing new equipment.

Giving small business owners the capacity to better manage pension auto-enrolment is one way in which alternative finance is helping small businesses. This is how a Sussex small business used peer-to-peer lending, through a commercial finance broker that specialises in alternative finance, to raise the capital to expand its capabilities.

As small businesses kick off 2019, it seems clear that there will be no let-up in the headwinds that affected market conditions and performance in 2018. To maintain forward momentum and manage auto-enrolment and other matters, business owners will need to make use of all the funding options available to them, including alternative finance.

Want to know more about what A&T Business Associates can do for your business? Contact Jon Rook-Allden on 01903 602211 or jra@atbusinessassociates.co.uk.